A new federal blueprint for closing tax loopholes unfairly benefiting the wealthy will target Canadians who use private corporations to “sprinkle” income among family members to lower their collective tax burden, according to a Department of Finance document obtained by the Toronto Star. Finance Minister Bill Morneau is scheduled to unveil a package of proposed reforms at a press conference Tuesday morning, part of an ambitious commitment to crack down on tax avoidance and evasion that emerged in the aftermath of the Panama Papers. “There are signs that our system isn’t working as well as it should, specifically when it comes to private corporations,” writes Morneau in an opening letter contained in the 63-page report. “There are worrying trends. There is evidence that some may be using corporate structures to avoid paying their fair share, rather than to invest in their business and maintain their competitive advantage.”The government is launching a 75-day public consultation on the proposed measures that are designed to target tax advantages not available to most Canadians.“Over the last decade, the number of such private corporations has increased substantially and evidence indicates that a significant share of taxable income has been shifted from the personal to the corporate tax base,” reads the report. Read more: Canada is the world’s newest tax havenCRA pursuing criminal charges against Panama Papers tax cheatsIncome sprinkling is a key method of shifting the tax burden from individuals to corporations, the report says. Wealthy Canadians can now legally reduce their tax obligations by routing their incomes through private corporations. They then pay salaries to family members, such as their children, who are subject to lower personal tax rates or none at all.The government is working on new rules that would “help to determine whether compensation is reasonable, based on the famil ...
|
